The role of government is to set up the rules such that good-of-all actions can be taken with minimal coordination (collusion), whereas net-bad actions require coordination between as large as possible a set of people.

Ideally, the Nash equilibreum should be the best for all. In practice, a certain amount of coordination will always be necessary.

A "tragedy of the commons" represents a failure of government.

Examples: We try to set up markets so that starting a new company takes a single person, but price fixing takes many people working together. "Illegal" actions take a great deal of collusion -- they require a large part of the judiciary to be in on the deal. We appoint leaders, single people who can make decisions on behalf of many.